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Short Answer Questions · Q11

Q.Give a brief account of Dadabhai Naoroji's 'Drain of Wealth' theory.

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Dadabhai Naoroji (1825–1917), often called the 'Grand Old Man of India,' developed the 'Drain of Wealth' theory as one of the earliest economic — rather than purely political — critiques of British colonial rule in India. In his 1901 book Poverty and Un-British Rule in India, Naoroji used his own careful estimates of India's national income to argue that a substantial share of the wealth India produced each year was being systematically transferred out of the country to Britain, through several channels: salaries and pensions paid to British civil servants and army officers (much of it eventually spent or saved in Britain rather than India), so-called 'home charges' (payments India was made to bear for administrative and military expenses incurred in Britain), and profits earned by British-owned trading and manufacturing companies operating in India, which were repatriated to British shareholders rather than reinvested in India. Naoroji argued that, unlike ordinary taxation (where the money at least stays within the country and can be spent on public services there), this drain left India permanently poorer, because the wealth generated in India was not returning to India in the form of investment, wages or pub …

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